Bitcoin price is up 42% in the fourth quarter, outperforming top bank stocks

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Historically, traditional market analysts and old-school investors have tended to look at Bitcoin and other cryptocurrencies with a cautious eye, and when crypto experts try to make comparisons between the two, these investors say it’s an argument for apples versus oranges.

Take Warren Buffett, for example, who has said many times that Bitcoin is nothing more than a Ponzi scheme because it produces nothing and therefore has no value.

According to these traditionalists, comparing Bitcoin to Apple, Tesla or a bank stock like JPMorgan is irrational, as the latter employ workers, manufacture products, and generate revenue and dividends that are distributed to shareholders.

Despite these arguments, a simple fact remains. Bitcoin had a strong year and the digital asset outperformed financial stocks in 2020 due to a sizeable surge in institutional demand, investor confidence in BTC’s exponential growth potential, and its asymmetrical price movement amid global economic uncertainty.

As shown in the chart below, the majority of top US banks posted record results in the second quarter as the entire market retreated from the COVID-19 sell-off in mid-March, but significant threats to the stock market and the global economy persist. At the same time, Bitcoin massively outperformed the financial sector, especially in the fourth quarter.

Bitcoin price action against JPM, Goldman Sachs, BofA and Citigroup. Source: TradingView.com

Bitcoin price rose 42% since the beginning of the fourth quarter

Since the beginning of the fourth quarter, the price of Bitcoin has risen from $ 10,773 to $ 15,366 at Binance. This is an impressive 42% increase in less than two months and proof of the strong momentum of the digital asset.

Quarterly Bitcoin Return (%). Source: Skew.com

The strength of the Bitcoin rally can be attributed in part to the growing perception that an alternative store of value is. Earlier this year, billionaire Wall Street investor Paul Tudor Jones described Bitcoin as the ideal inflation game. The overall positive sentiment regarding BTC as a potential safe haven asset is significantly bolstering its momentum.

Compared to other sectors, bank stocks have performed relatively well since the March crash. The shift in consumer demand from in-store to online shopping has had a serious impact on companies that lacked a digital footprint. However, the loose financial conditions, massive economic stimulus from the Fed and the government’s pro-business stance resulted in banks outperforming quarterly estimates and performing well.

JPMorgan, for example, has rallied 32.63% from the March 23 low. In the fourth quarter, the $ 319 billion banking giant was up over 8%.

In the second quarter of 2020, JPMorgan generated $ 7.3 billion in revenue from trading bonds, significantly beating analysts’ estimates. At the same time, income from investment banking and stock trading also increased.

Other large banks, including Goldman Sachs, saw a similar trend. Goldman’s trading division had sales of $ 4.55 billion. The bank easily exceeded Wall Street’s expectations, posting a 29% year-over-year increase.

While each of these accomplishments is a laudable feat, especially given the high level of uncertainty and economic downturn caused by the coronavirus pandemic, Bitcoin’s price action dwarfed those of banks and other risky assets for most of 2020 posed.

Why does BTC continue to outperform most assets?

Bitcoin Performance Compared to Macro Assets (%). Source: Skew.com

Bitcoin has consistently seen a unique combination of rising institutional demand and an ever-growing mainstream awareness.

According to a survey published by Grayscale, more than half of US investors are interested in investing in Bitcoin. The study said:

“Interest is growing: More than half of US investors are interested in investing in Bitcoin. In 2020, more than half (55%) of respondents expressed an interest in Bitcoin investment products. This is a significant increase from the 36% of investors who said they were interested in 2019. “

Corporations, investment banks, and retail investors have recognized that Bitcoin offers great growth potential, and this may be why companies like PayPal and Square have chosen to support the cryptocurrency.

Coincidentally, financial institutions that have actively supported cryptocurrencies have done particularly well in recent months.

PayPal stock, for example, rose 12% in the past three days and showed bullish momentum as it announced it would integrate buying and selling crypto.

Towards the end of 2020, investors of all levels will be watching the price of Bitcoin (BTC) closely to see if it continues to outperform the stock markets by large amounts.

The fact that big banking stocks like JPMorgan, Goldman Sachs, Citigroup and Bank of America are lagging behind a “small-cap” cryptocurrency is a significant event that is likely to attract more curious investors to the crypto sector.